Even if you have bad credit, a debt consolidation loan can help you pay off your credit card debt. Since debt consolidation loans with bad credit can be expensive, check multiple loan offers and other debt consolidation solutions.
Avant offers a streamlined process where you can check their loan options without affecting your credit, apply for a loan, and submit all documents electronically. Avant offers loans to borrowers with lower credit scores than most personal loan lenders.
|Fixed APR||9.95 - 35.99%|
$2,000 - $35,000
|Repayment||24 to 60 months|
|Fees||4.75% at the time of funding|
|Time to fund||Next business day after approval|
OneMain sets itself apart from most personal loan lenders by offering a personal loan you secure with an asset you own, such as a car. You can get a lower rate if you have collateral to secure the loan. If you can’t get approved for an unsecured loan and have a valuable asset, consider an OneMain loan.
|Fixed APR||18% - 35.99%|
$1,500 - $20,000
|Repayment||24 to 48 months|
|Fees||Origination fee 1% - 10%, late fees|
|Time to fund||As soon as 24 hours.|
You may benefit from a LendingPoint loan if your credit scores are in the 585-670 range. If your score is over 700 or below 585, look for another lender or another solution.
|Fixed APR||9.99 - 35.99%|
$2,000 - $25,000
|Repayment||24 to 48 months|
|Fees||Origination fee as high as 6%, a late fee as high as $30|
|Time to fund||Funds available the day after loan approval|
NetCredit’s extremely high-interest rate loans can benefit you if you have bad credit or no credit history and you will use the loan funds to address a desperate or emergency need that is more important than the loan’s sky-high costs.
|Fixed APR||34 - 155%|
$1,000 - $10,000
|Repayment||6 to 60 months|
|Fees||Origination fee up to 5% and late fees|
|Time to fund||One day after approval|
A debt consolidation loan with bad credit lets you take one loan and pay off multiple debts.
You borrow money from one lender and pay off several credit cards, bills, or unsecured loans. Debt consolidation loans for bad credit generally have higher APRs, so expect high-interest rates and more considerable origination fees. Repayment terms are between 24-60 months, which means high monthly payments.
While debt consolidation loans can simplify your finances with one monthly payment, they are not always the best solution.
Each lender has its qualifying guidelines to qualify for a debt consolidation loan with bad credit, including credit scores and income requirements.
There is no minimum credit score for a debt consolidation loan with bad credit.
It is easy to qualify for a personal loan with a credit score over 680. It is challenging to be eligible for a credit score under 600. Some lenders do not offer debt consolidation loans to borrowers who do not have a very good to excellent credit score. However, there are lenders like Avant or OneMain Financial that specialize in bad credit scores.
Avant reports that most of their borrowers who qualify for a debt consolidation loan have scores between 600-700. However, in some cases, they will go as low as a 580 FICO credit score.
While credit scores are essential, lenders also look at your income, debt to income ratio, and other factors that help determine if you can afford the monthly payment.
It is common for people overwhelmed with debt to think that if they could borrow enough to pay everything off, they would have a fresh start and be able to take control of their finances.
The catch is that many people who are struggling with debt have bad credit, which makes it hard to qualify for a debt consolidation loan.
Bad credit can be due to financial hardship, or due to poor financial habits. Before you look for a debt consolidation loan, it is essential to commit to taking the right steps to improve your financial situation. Set a specific goal of paying off your debt in a certain timeframe.
Your budget is a roadmap to help determine if a debt consolidation loan is an appropriate solution. To find the right debt consolidation solution, you need to know exactly how much money you can afford each month. Since a debt consolidation loan with bad credit is for short-term and high-interest rates, the monthly payments might be too high.
Debt consolidation loans with bad credit generally have high fees and interest rates. However, there are bad credit debt consolidation loans, especially for people whose credit score is on the rebound. Avoid scams and shop around for the best terms and compare interest rates, origination fees, monthly payments, and prepayment penalties.
If you do qualify for a debt consolidation loan due to bad credit, or the monthly payments are not affordable, then look for debt relief solutions that are not based on credit score. Fortunately, there are debt consolidation alternatives for people with bad credit, including Credit Counseling and a Debt Management Plan, Debt Settlement, and Bankruptcy.
You have set yourself up for success. Your next step is to stick to your plan. Monitor your budget and make your monthly payments on time. As your credit score improves, you might be able to find better terms or increase your monthly payments and pay off your debt faster.
Shopping for a bad credit debt consolidation loan is frustrating, and can even be dangerous. It is easy to get frustrated when one lender after another turns you down. If you speak with traditional lenders, such as banks or credit unions, you will find out that you need good credit to get an unsecured personal loan and excellent credit to get a low-interest personal loan excellent credit. You will find out the same thing if you speak peer-to-peer lenders or online lenders that service the prime customer.
Don't get scammed! If you are desperate for a loan and are getting turned down repeatedly, you may be lured by an ad you see that says "Bad Credit Debt Consolidation Loans. No one is turned down." There is no such thing as a lender who makes loans to everyone. No one is a more natural victim to scam than someone who needs something desperately. The most common scam is charging a fee for your application. Never pay a fee in advance for a loan.
When you shop for a debt consolidation loan for bad credit search for a lender that offers more flexible terms and a qualifying process that looks beyond your credit score. One option is your local bank or credit union.
Most credit unions also have minimum credit scores, but it may consider compensating factors that allow you to qualify. In general, credit unions cap their interest rates. For example, one leading credit union, First Tech Federal credit union, explains that "securing a personal loan with bad credit is not impossible. We have a full range of products to offer to all credit types. We will work with you to understand your unique situation." However, credit unions have membership requirements and might not be competitive in your area.
Your local bank is another place to look for a bad credit debt consolidation loan, especially if you have a personal and long relationship with the bank. The loan officer will be able to look beyond your credit score and consider other financial factors.
It is easy to shop for a bad credit debt consolidation loan due to the abundance of online lenders. The most significant advantages are the ease of comparing rates and terms, the simple application, quick reply, and funding.
The significant drawbacks to online debt consolidation lenders with bad credit are that they charge high-interest rates and substantial origination fees.
If you have bad credit, then Is a debt consolidation loan your only option? Bad credit lenders look at your current credit score, which indicates your history and may not represent your current situation.
Three factors to consider when looking for an alternative to a debt consolidation loan with bad credit are the amount of debt you have, the amount you can afford to pay each month, and the level of your financial hardship.
Here are some bad credit debt consolidation loan alternatives that you can consider to improve your situation.
Home Equity Loan: If you own a home, have sufficient equity, and wish to lower your monthly payment, consider a home equity debt consolidation loan. You need to have a credit score of about 580. Also, your total loan to value ratio cannot exceed 80%. For example, if your home is worth $300,000, then your current mortgage and the additional new home equity loan cannot exceed $240,000. (Some lenders will go up to 85% LTV).
The following are not credit-based solutions.
Snowball Debt Payoff: If you can afford to make a significant monthly payment, but don’t qualify for a short-term debt consolidation loan, consider the debt snowball method. You pay off your debt quicker by adding to your current payments. Even though you don’t get a lower interest rate, you pay off your loan quicker and save money by making additional payments on your principal.
Debt Management Plan: If you can afford your minimum payments but are looking to reduce your interest rates, a debt management plan might help. A debt management company negotiates with your creditors (mainly credit card companies) to lower interest rates and fees for a monthly fee. You make one consolidated payment into a special account. The debt management company then transfers the appropriate sum to each creditor. Similar to a bad credit debt consolidation loan, your pay off your debt in about five years.
Debt Settlement: Consider a debt settlement program if you can’t afford your monthly payments and financial hardship. To qualify, you will need to show hardship. Otherwise, your creditors will most likely not negotiate an agreement. You stop paying your creditors, and your credit takes a hit. Your creditors potentially continue with collection efforts, including collection letters, calls, and a possible lawsuit. You make monthly payments into a special account in your name. When there are sufficient funds, the debt settlement company then negotiates a settlement. Your total costs might be around 75% of your original debt.
Bankruptcy: A more extreme debt consolidation loan alternative is bankruptcy. If you are in undue hardship, you can discharge your qualifying debts through a Chapter 7 and hold on to protected assets. A chapter 13 bankruptcy is a court-supervised payment plan, whereby you pay back your creditors over four to five years. Bankruptcy protects you from lawsuits during this period. Bankruptcy is complicated, and it is recommended to consult with an experienced bankruptcy lawyer.